The CARE Act signed into law on March 27, 2020, is a 2 trillion package of aid to individuals and businesses to ease financial distress due to COVID-19. It’s an over eight hundred page bill, so there are lots of details. Over a series of blog posts, I’m going to describe the provisions that will have the most impact on individuals and small businesses.
To start, I’ll describe the stimulus payments to individuals provision.
STIMULUS PAYMENTS
In general, individuals will be entitled to $1200, while joint filers will receive $2400 and taxpayers will receive $500 for each child under the age of 17. The payments are not taxable. Limitations and phase-outs depend on income (AGI- adjusted gross income) as follows:
The rebate will be reduced for taxpayers whose AGI exceeds:
$75,000 for individuals
$150,000 for joint filers
$112,500 for Head of Household
For each $100 over the applicable threshold, you lose $5 of the rebate until it goes to zero, which means that once you hit the following AGI, you don’t get a rebate:
$99,000 for individuals
$198,000 for joint filers
$136,500 for Head of Household
The above numbers are based on the AGI from your 2019 tax return, or if that return hasn’t been filed yet, your 2018 return. If your income was higher in 2018 or 2019 than you anticipate in 2020, when you file 2020 taxes, you will get the rebate.
PLANNING TIP: If your income is lower in 2019 than in 2018 and you haven’t filed 2019 taxes yet, it would be a good idea to do so as soon as you can. It’s not clear how soon the rebates will go out.
You don’t have to apply for payment. If the IRS already has your bank account information because you have a direct deposit of your social security check or tax refunds, the money will go there. Otherwise, the IRS will mail a check. If your payment gets misdirected somehow, you will get a paper notice in the mail letting you know where the payment went and in what form. If that doesn’t work, you will have to contact the IRS using the information in the notice.
PLANNING TIP: If you know the IRS doesn’t have your most current address and you expect a rebate, you can file Form 8822 to have your address updated.
Next up on the blog: CARE Act Retirement Account provisions.
